ELLIOTT WAVE ANALYSIS - Latest Market Commentary
Stock Indices
Stock markets around the world are in a mature state of progress when examining the overall uptrends from either the Sep./Oct.’12 or the June ’12 lows. Recent updates have measured several upside targets for our international benchmark index, the S&P 500 – the minimum towards 1816.25 and the maximum to 1862.69. The lower of these targets is now being approached and especially relevant given a visible five wave impulse pattern approaching completion from the mid-November low of 1746.20. Viewed in isolation, there is a valid reason to depict this high as ending the entirety of the June ’12 advance as intermediate wave (3) within the progressive uptrend. But despite this, the equivalent patterns in the Eurostoxx 50 and Dax 30 remain incomplete, especially in the examination of an incomplete five wave upswing from the June ’13 lows. In an attempt to synchronise the activity of U.S. and European indices, ###we now expect the S&P 500 to ultimately extend to the higher of the original upside targets to 1862.69 before ending intermediate wave (3). But in the shorter-term, a -3% per cent downswing is expected prior to resuming a final attempt to 1862.69. This is purely a function of subdividing the finalising 5th wave advance from the June ’13 low into a smaller impulse pattern with a temporary fourth wave correction due with downside targets to 1746.20+/-. Confirmation is expected anytime soon. The Eurostoxx 50 and Dax 30 upside targets therefore remain unchanged from last week and now synchronise with the U.S. indices. In Asia, the Hang Seng has now broken above the early Feb.’13 high of 23944.74, a requirement to validate a 5th wave completion of the larger diagonal pattern unfolding from the October ’11 lows. Despite this, the 5th wave appears incomplete and so a little further is forecast prior to the beginning of a sizeable counter-trend decline. In Japan, the Nikkei 225 is approaching horizontal upside targets at 15900.00+/- and this will be a major test for ending the second sequence of a horizontal flat correction that began from the May ’13 high. Surpassing this would only indicate the second sequence extending as part of an expanding flat pattern that would not change downside targets to 12415.00+/- in the months ahead. 2nd December 2013
Currencies (FX)
The US$ index is now approaching downside targets towards the 8023+/- area, a high-probability support that could trigger a reversal signature which in turn would confirm the completion of the smaller second wave counter-trend correction from 8146. Subsequent third wave upside acceleration would then corroborate the larger bullish outlook that projects ultimate upside towards 8885+/- during the next months. Likewise, the Euro/US$ is at a juncture point as it has already traded into minimum targets at 1.3623 – now, a reversal is required to validate the resumption of the larger downswing in progress from the October high of 1.3833. Once confirmed, subsequent downside in the months ahead is projected towards 1.2528 to finalise a larger expanding flat sequence that dates back to the Feb.’13 high of 1.3711. ###Sterling’s non-confirmation of the 1.6337 resistance which was expected to stall the upside momentum forewarns us of more upside potential in the months to come. This is because short-term structure now suggests the finalisation of a five wave impulse sequence in progress from the November low of 1.5854 towards ultimate objectives at 1.6514. This smaller five wave impulse is the last trending wave within the larger 3rd wave impulse that began from the Aug.’13 low of 1.5102 which implies a 4th wave counter-trend decline and a finalising 5th wave advance to follow. Original upside for the entire larger five wave impulse was previously measured to 1.6534 – it is evident that the shorter-term 1.6514 target is too close to that original level. Therefore, ultimate upside to be approached during the next few months has been extended towards 1.6713. No change on US$/Yen – it is still on its way towards ultimate upside at 10372-74 which equals the previous May ’13 high. From a pattern-point-of-view, the upswing from the June low of 9379 is seen as wave ‘B’ within a larger horizontal flat sequence – thus, a reversal from the 10373+/- area will initiate a sustained downswing in the months ahead, with ultimate downside back to the 9379 low. 2nd December 2013
Bonds (Interest Rates)
The U.S. Thanksgiving holiday of last week gave everyone some breathing space over the debate of Federal Reserve ‘tapering’. Meanwhile, US10yr yields ended a counter-trend upswing from the October low into the recent November high at 2.841% and have nudged lower to confirm the next stage of declines have begun the finalising sequence of a larger zig zag pattern in progress from the September high. Downside targets remain unchanged towards the fib. 50% retracement level of 2.201% as this marks the idealised completion for primary wave 4’s correction. From this forecast we can presume that a delay in ‘tapering’ ###will re-enter the discussions during the next week with the ‘dovish’ Janet Yellen in focus as the incumbent Federal Reserve chairwoman. In Europe, Germany’s DE10yr yield signals further declines from the recent November high of 1.800%. Downside targets for the completion of a double zig zag pattern unfolding from the September high of 2.051% remain towards 1.564%. We await a test of this level to confirm the completion of a 2nd wave correction but a break below 1.500 would trigger additional downside even though the larger trend remains directionally upwards. 2nd December 2013
Commodities
Gold was quickly rejected from last week’s low of 1227.86 and is now in the process of staging a reversal signature. Once confirmed (by breaking above 1257.01), it should trigger upside acceleration, thereby validating the completion of the entire downswing from the August high of 1433.82 and corroborating the bullish outlook for the next several weeks. Basis the underlying pattern structure that suggests an ‘ascending triangle’ is forming, gold is expected to return to the 1433.82+/- area. This translates into sustained upside potential for silver towards 23.33-89. In the case of silver, however, there is still the risk of one additional short-term sell-off below 19.59, with idealised support ###to original targets at 19.09 prior to staging the larger advance. Also, the pattern is different – a contracting-symmetrical triangle is unfolding from the June ’13 low of 18.22. This is the reason why silver is not expected to trade close to the August high of 25.12 – the 23.33-89 area is measured by a fib. 61.8% correlative ratio of the initial 18.22-25.12 upswing. Brent oil is gradually advancing towards forecast upside objectives at 113.20. This would complete a smaller 2nd wave counter-trend expanding flat sequence that began from the 1st Oct.’13 low of 106.81 – a reversal from there would then trigger downside acceleration in the months ahead. Ultimate downside objectives remain towards 96.25. 2nd December 2013
